Dick's Sporting Goods (NYSE:DKS) reported strong fiscal fourth-quarter results earlier this week. For the quarter ending Feb. 1, 2020, same-store sales (comps) increased by 5.3%, driven by higher traffic and spending. Management expects flat-to-2% comps next year, which incorporates supply chain disruptions due to the novel coronavirus pandemic affecting results. There may be a further effect on sales with more people staying home, but I expect this is temporary and that normal shopping patterns will resume once the fears over the outbreak ease.

While Dick's has held up well, this has not been a fun time for the sporting goods industry. Privately owned Modell's Sporting Goods on Wednesday filed for bankruptcy and plans to close all of its stores. Others, like Big 5 Sporting Goods, have only a $40 million market cap, indicating serious issues. Another industry participant, Hibbett Sports, while reporting solid fiscal third-quarter results, has lost 60% of its market value over the last five years. Over the years, there have been other notable bankruptcies, including Sports Authority's 2016 filing and Michigan-based MC Sports 2017 filing.

What's Dick's secret? After all, this latest positive earnings report comes as Dick's shook up its merchandise after it stopped selling guns and de-emphasized hunting merchandise.

An aisle in a store displaying various merchandise.

Image source: Getty images.

Emphasizing omnichannel

Dick's has been placing a growing emphasis on building out its omnichannel capabilities. The company has been investing in its website to create a smooth shopping experience. The combination of a physical store and an online presence allows for things like online order/store pick-up and easy returns.

This is not unique, of course. But it's nice to see the company having success at the same time many retailers are taking a hit from online competition. In the latest quarter, e-commerce sales grew 15% year over year, and its share of Dick's total top line increased to 25% versus 23% last year.

Differentiating merchandise

No doubt, the company lost customers when it stopped selling firearms. However, it has made up for this by broadening its merchandise selection, including those that attract a different demographic. This includes exclusive, private-label brands such as CALIA (a women's apparel brand, which attracts more female shoppers to stores), Second Skin (apparel aimed at athletes), and DSG (which attracts more value-conscious consumers since it offers goods at lower price points).

As long as it's appealing, this private-label merchandise draws customers to Dick's since people can't find it anywhere else. With sales of these goods growing from 10% in fiscal 2016 to 14% in fiscal 2018,  the company's goods seem to be striking the right chord. Better yet, the private-label goods generate a higher gross margin.

In short, Dick's merchandising strategy is attracting more customers that generate a higher profit. That sounds like a winning formula to me.

Shareholder-friendly policies

Dick's is returning some of the profits to shareholders, which is nice to see. This includes a history of annual dividend increases. Last year, the company paid out a total of $1.10 a share, 22% above 2018's $0.90.

Management has been repurchasing shares, too. Last year, it spent more than $400 million to buy back shares, paying an average of $36.40 per share. Until last month's market swoon, this looked like a very good use of capital. As long as management stays on the current track, I believe these share repurchases will again prove astute.

What does Dick's have to do? It has to continue down the same path.

While the short-term impact from the coronavirus creates uncertainty, as long as Dick's still offers appealing, exclusive merchandise through physical stores and online, the company should be just fine over the long term.